In our last Newsletter we talked about the Price of Failure and that when projects fail there are wide ranging implications for financial performance and reputations. The latest round of result announcements by the major Drilling Contractors has yet again highlighted this.

On the whole results announced have been positive with uptime and utilization increasing and day rates still seeing some positive upward trends. These results are coupled with some strong contract awards and revenue backlogs meant that the market reacted positively to the majority of results.

However consider this one example of a major Drilling Contractor who reported Fleet Utilization of 99% up from 83% the previous quarter, an increase in Revenue of 3% and an increase in Day Rates of 10% and yet saw a drop in share price of 3.5%.

The underlying reason behind this sharp drop was failing projects, notably delays to two newbuild rigs and significant delays in the shipyard stay of another. Obviously the executive management team of this Drilling Contractor had focussed on the positive aspects of the results but the market understands that the ability to get rigs on contract, on time and on budget is the crucial way to unlock order book value.